Retail Gift Aid: claiming on goods sold in charity shops
How Retail Gift Aid lets a charity shop claim Gift Aid on donated goods by selling them as the donor's agent: the three methods, the 21-day letter and the records to keep.
The short answer
Money a charity makes from selling donated goods, such as clothes, is not a donation, so it doesn't qualify for Gift Aid. Retail Gift Aid gets round this: the donor appoints the shop as their agent to sell the goods on their behalf, then gives the sale proceeds, minus any commission, to the charity as a Gift Aid donation.
How the agency arrangement works
- Staff or volunteers explain that the shop, auction or website will sell the goods as the owner's agent, if the owner agrees to give the proceeds to the charity.
- The donor signs up, including a Gift Aid declaration. HMRC publishes a declaration template for goods sold by charities, linked under Sources.
- The shop sells the goods and can deduct a commission.
- The donor is told what their goods sold for, and the net proceeds become their Gift Aid donation.
The three methods
HMRC allows three ways of running Retail Gift Aid:
- Standard Method: the donor brings goods to the shop and agrees it will sell them as their agent, deducting a commission. The shop writes to the donor about the proceeds and must give them at least 21 days to respond before treating the net proceeds as a donation.
- Method A and Method B: variations with different notification arrangements, including where a trading company sells the goods and passes the proceeds to the charity. HMRC's guidance sets out when each can be used.
Records to keep
- the donor's dated Gift Aid declaration
- a copy of any written agreement with the donor
- documents showing the donor was told the sale proceeds
Before you start
Retail Gift Aid has more detailed conditions than this page covers, especially for Methods A and B. Read HMRC's guidance, linked below, before setting it up, and ask your accountant or HMRC's charities helpline if you are unsure which method fits your shop.
Common questions
Can a charity shop claim Gift Aid on donated clothes?
Not on the sale of goods it owns. But if the donor appoints the shop as their agent to sell the goods for them, and then gives the sale proceeds to the charity with a Gift Aid declaration, Gift Aid can be claimed on those proceeds.
How long must a donor have to respond to the sale letter?
Under the Standard Method, the shop must give the donor at least 21 days to respond before treating the net sale proceeds as a donation.
Can the shop take a commission?
Yes. The shop acts as the donor’s agent and can deduct a commission; the proceeds after commission are what the donor gives to the charity.
Sources
- GOV.UK: Gift Aid, what donations charities and CASCs can claim on (selling donated goods)
- HMRC: Charities detailed guidance notes, Chapter 3: Gift Aid
- HMRC: Gift Aid declaration when goods are sold by, and the proceeds gifted to, charities
This guide is general information for UK charities, not tax advice. HMRC's guidance can change, so check the sources above before relying on it for a claim.